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Alaska Sen. Torgerson rates offshore LNG greatest threat to Arctic gas Wants United States to remove incentives for imported LNG; believes stand-alone Mackenzie Valley pipeline has edge over highway project Gary Park PNA Canadian Correspondent
The Mackenzie Delta may well beat the North Slope in the race to ship gas to market, but the biggest threat to both is posed by offshore liquefied natural gas, Alaska Sen. John Torgerson said in a sweep through Alberta in mid-October.
He warned the prospects for importing LNG products into North America could scuttle both projects and strand Arctic gas supplies for some time.
There are already some 24 proposals for LNG facilities that could provide 13.5 billion cubic feet per day of gas to the Lower 48, while an Alaska line would provide 4 billion cubic feet per day, with about another 1 billion cubic feet coming from the Mackenzie Delta, he said in a keynote address to a Calgary conference.
Torgerson said an LNG facility can be built for about $750 million compared to between $12 billion and $20 billion for a northern pipeline, while many of the LNG projects would be economical at today's low gas prices.
"The same people who are dealing with us right now, the large oil companies, are going off somewhere else to get a higher profit," he told the conference on Mackenzie Delta oil and gas development strategies.
LNG incentives should be removed Torgerson said he favors proposed changes to U.S. policy to remove incentives for offshore LNG landing in the United States.
"Right now, it is more economical to ship North American gas south. But this is a very competitive business. I don't want my government to go out and give incentives to LNG to compete with North American gas. And I don't think your government should either," he told the Edmonton Journal.
But to boost its own chances of getting a pipeline, he said, Alaska should replace its existing fixed royalty rate with a more progressive regime — a change he hopes will be proposed in legislation in April 2002.
Torgerson followed his Calgary speech by meeting in Edmonton with Alberta Energy Minister Murray Smith, the Edmonton Chamber of Commerce and the University of Alberta School of Business advisory council. He also had discussions with Foothills Pipe Lines Ltd., which holds permits for the Alaska Highway route, and Agrium, which owns and operates a gas-fired ammonia plant near Edmonton.
He later told the Edmonton Journal that Canada has "made a lot of progress removing the barriers that were blocking development of a stand-alone Mackenzie Valley pipeline.
"It's much cheaper to build and I also think that the market is better prepared to absorb the smaller amount of gas that would be shipped down from Canada," he said.
Torgerson said he doesn't agree with industry forecasts that Alaska gas could be moving south by 2007, suggesting 2011 was a more realistic target.
Mackenzie could move first "If the Canadians can get their act together, as they appear to be doing, there's time for them to build their pipeline down the Mackenzie first," he said.
But Torgerson was emphatic that an "over-the-top" pipeline won't happen because it would "rob us of significant job and business opportunities," including petrochemicals or other value-added projects.
"Alaskans would rather see the gas left in the ground" than agree to an "over-the-top" line, he said.
However, Torgerson said he opposes subsidies for an Alaska Highway project, as proposed by Gov. Tony Knowles, noting the North Slope producers are asking only for regulatory certainty.
He would also need much stronger evidence before he would approve any incentives to help the Alaska producers achieve a 15 percent return on investment, Torgerson said.
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